When Mike Formby took over the state’s harbors two years ago, he was given a book that illustrated the 50-year history of container shipping.

“The Box That Changed the World” came from Gary North, then senior vice president of Matson Navigation Co.

North wanted to instill in the new state administrator an appreciation of Hawaii’s harbors as the lifeline to the rest of the world.

Since retiring from Matson in 2008, North has more of a direct hand than ever in shaping the way Hawaii’s harbors will look in the next 50 years, a job that is all about moving those boxes quickly and efficiently between vessels, trucks and islands.

On Sept. 10, he was named executive director of the Hawaii Harbors Users Group, a nonprofit that represents 15 companies and organizations.

Organized four years ago to enable harbor-users to speak with one voice on harbor improvements, HHUG recently restructured as an industry association with “an expanded mission to promote the health and growth” of Hawaii’s harbors.

North has gone from being a volunteer to the group’s only paid staff member.

And like any good advocacy group, HHUG doesn’t want to simply pester politicians but to educate residents on their 10 commercial harbors, the point of entry for nearly all of the 80 percent of imported consumer goods.

“We want them to understand how reliant our economy is on our commercial harbors,” North said.

A group HHUG

Funded by a $17 million loan from the state Harbors Division, contractors are already working on six projects. They include $600,000 for design of the UH Marine Center at Pier 35 in Honolulu Harbor, $800,000 for design to improve the terminal at Honolulu’s Pier 2A, and $900,000 for development plans for harbors in Hana, Maui, and Kawaihae on the Big Island.

(Hawaii Superferry is also a HHUG member — unless it misses a $5,000 annual dues payment.)

Hawaii’s harbor troubles are well-known to business. They haven’t been upgraded in 20 years, there is limited berth space and terminal resources, and crumbling docks.

An $842 million modernization plan was approved by Gov. Linda Lingle and the Legislature in 2008. It was later scaled back to $618 million largely because NCL pulled two of its three vessels out of Hawaii.

The harbors plan is now administered by the Aloha Tower Development Corporation, and planning, design and construction work will continue the next six to 10 years.

Though the state spends up to $30 million a year on harbor improvements, new revenue is needed for growing costs such as debt payments on bonds.

The Harbors Division, run by the state Department of Transportation, has also seen its $92 million in revenue for fiscal year 2008 drop 18 percent in 2009 to $75 million, due to a 14 percent reduction in cargo volume.

Paying more for rice

The bulk of harbor improvements will be paid by increased user fees, which will likely be passed on to consumers. The state has not increased fees for port entry, wharfage, demurrage (late penalties) and dockage since 1997.

If approved, the tariff on a 40-foot container from the Mainland to Hawaii, currently assessed at $77, will go to $99 next year. In 2011, it goes up 20 percent, and then gradually decreases to a 3 percent annual hike after 2015, when the tariff will stand at $168.

For containers to the Neighbor Islands, the rate will grow from $129 to $165 next year, and to $356 in six years.

That $356 tariff in 2015 would actually be $506 if the rate accounted for “three moves,” meaning from the Mainland to Honolulu to a Neighbor Island. And agricultural products grown in Hawaii will be discounted.

Officials also say Hawaii’s rates will remain below those at big West Coast ports.

Still, Hawaii will have to brace for higher costs. A 20-pound bag of rice will cost a penny-and-a-half more next year and nearly 10 cents more in 2015.

“We know that it seems like a bad time to raise rates during a recession, but this plan started in 2005,” Formby said. “And the cost of doing nothing is exponential.”

If Hawaii’s harbors are not upgraded, according to a 2007 report by economist Leroy Laney, it will cost the state more than $50 billion in lost gross domestic product.

“This is especially large considering the fact, to date, estimated costs of harbor improvements are under $1 billion,” Laney wrote.

That $50 billion loss would come from “gridlock and inefficiencies,” delaying the delivery of goods and raising labor costs, said Glenn Hong, president of Young Brothers and Hawaiian Tug & Barge. “The balance line would go way up.”

Written comments by harbors users on the rate increases were due Sept. 23, while public hearings on the increases will be held on all major islands as early as November.

If approved, the first increase could go into affect in January.

HHUG at the table

Formby, an attorney with expertise in maritime law, welcomes HHUG’s participation in policy formation. HHUG has previously collaborated with the D.O.T. in applying for federal grants and prioritizing the local harbors plan.

“The new mind-set is that D.O.T. Harbors can take advantage of industry interest in how the harbors are operated and use HHUG to help inform us as we go through the decision-making process,” Formby said. “HHUG brings the industry’s perspective to the table on important harbor issues.”

North credits Formby with helping state agencies trust harbors users, a relationship between government and industry that has not always been so smooth.

HHUG’s new leadership includes Hong as secretary-treasurer; co-chairmen Vic Angoco, Matson’s vice president; and Douglas Won, vice president and area manager for Sause Bros.

North, who previously served as HHUG chairman, still works as a consultant for the Oakland-based Matson, Hawaii’s largest ocean shipper.

As HHUG’s only paid employee, he works mostly from home about 10 to 15 hours a week.

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